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Nestlé Buys Meal-Delivery Company Freshly as Pandemic Boosts Eating at Home

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10/30/2020 | 04:54pm EDT

By Saabira Chaudhuri

Nestlé SA took full ownership of Freshly in a deal that it said values the online prepared-meal startup at $950 million, positioning the world's biggest packaged-food company to capitalize on a pandemic-driven shift toward at-home dining.

Nestlé said it would pay an additional $550 million if the business hits certain growth targets. The Swiss food giant bought a 16% stake in Freshly in 2017. Nestlé said Friday that the agreement to buy the rest of the company will help it navigate the "new realities" in the U.S. food market.

Consumer goods companies have been betting that a shift toward shopping online and eating at home -- forced on many during Covid-19 lockdowns -- will remain long after the pandemic abates.

"Consumers are embracing e-commerce and eating at home like never before, " said Nestlé U.S. head Steve Presley. "It's an evolution brought on by the pandemic but taking hold for the long term."

Freshly sells prepared meals but competes with meal kit companies like Blue Apron Holdings Inc. and HelloFresh SE, which deliver portioned ingredients for meals that can then be prepared at home.

The pandemic has given a limited boost to the nascent industry. Investors had cooled on Blue Apron, a pioneer in the business, over the high costs of procuring and delivering kits. But the coronavirus crisis has lifted sales, and Blue Apron in July reported its first quarterly profit since going public three years ago.

Uber Technologies Inc. this summer said it would buy its Uber Eats rival Postmates Inc. for $2.65 billion, a move the ride-hailing operator sees as helping it better compete in restaurant delivery and the market for shuttling groceries and other staples. The month before, Grubhub Inc. agreed to combine with Europe's Just Eat Takeaway.com.

Freshly currently ships more than a million meals each week to customers in 48 U.S. states and has estimated sales for this year at $430 million. It and Nestlé said Friday that their deal would help Freshly expand quickly.

The company has tried to distinguish itself in the increasingly crowded market for prepared and partially prepared food by selling meals that it says are gluten-free, with less sugar, fewer processed ingredients and more nutrients than those of rival companies.

The agreement marks Nestlé's latest push to diversify from its traditional portfolio of big packaged-food brands. The maker of Nescafé coffee and DiGiorno frozen pizza in August agreed to buy the rest of a biopharmaceutical company that earlier this year won approval for the first treatment for peanut allergies. That deal valued the company, Aimmune Therapeutics Inc., at $2.6 billion including debt. Like the Freshly purchase, Nestlé had previously held a stake in Aimmune.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

10-30-20 1653ET

Stocks mentioned in the article
ChangeLast1st jan.
NESTLÉ S.A. 0.00% 103.1 Delayed Quote.-1.60%
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